U.S. moves closer to energy independence

KANSAS CITY, Mo. — It has been four years since Jay Hakes wrote a book about energy independence and the benefits it could give the United States.

But would it ever happen? The former head of the Energy Information Administration was hopeful, though he had seen a promising effort to curb imports in the 1970s and the early 1980s eventually derailed by cheap imported oil.

His optimism, however, is growing that the country is again on a path to energy independence and that this time it could stick. A multiprong effort that includes increased domestic oil and natural-gas production, energy efficiency and more biofuels has already helped push petroleum imports down to 45 percent of the petroleum needed to meet U.S. demand, compared with 60 percent in 2005.

“There is not a silver bullet, but there is silver buckshot,” Hakes said.

The idea that energy independence is an achievable goal has made it an issue in the presidential campaign, although it has been overshadowed by jobs and the economy.

Republican nominee Mitt Romney promises to be more aggressive on drilling for oil and natural gas by opening most areas where it is not now allowed, including off the Pacific Coast. He would also approve the Keystone pipeline, which would boost oil imports from Canada.

President Barack Obama, a Democrat, is pushing an “all of the above” approach and has some differences with Romney’s. Obama would increase drilling, but some areas would remain off limits. He has approved a portion of the Keystone line, but says he won’t make a decision on the northern leg until next year.

The Obama administration in August announced new vehicle fuel economy standards, rising to an average of 54.5 miles per gallon. Romney opposes the new standard.

But this much seems clear despite the different approaches: Our reliance on foreign oil will decline.

“No matter who is elected, we will be more energy independent every year for the next decade, unless there are some extreme policy changes,” said James Williams, an analyst for WTRG Economics.

There is a range of forecasts to show the point. The Energy Information Administration has one of the more conservative outlooks. The federal agency expects that by 2024 the United States will produce enough petroleum and biofuels to meet 62 percent of demand. Toss in what Canada delivers, and it could rise to 75 percent.

The American Petroleum Institute, an oil industry trade group, wants to unleash the drilling rigs, including into current off-limits areas. By 2024, it says, U.S. production could provide 74 percent of the country’s liquid fuels and biofuels 10 percent more. Toss in a growing contribution from Canada, and the United States wouldn’t need petroleum from any other country.

There are problems with both forecasts. The Energy Information Administration considers only policies in place when it makes its forecasts, so its outlook for production and energy conservation could be understated. The American Petroleum Institute by contrast is probably overestimating production gains, in part because environmental objections could curb drilling in some areas.

Neither forecast contains big contributions from electric or natural gas-powered vehicles, which shouldn’t be counted out. And a major development such as a breakthrough that would commercially produce fuel from algae would be a game changer.

On the pessimistic side, some analysts think the world oil situation will be much worse than most forecasters are saying. They think production estimates are too optimistic and in any event will be overtaken by rising demand from China and other emerging countries.

Defining and measuring energy independence can be difficult. Typically it’s thought to mean being completely self-sufficient, but Hakes said reducing imports to between 25 and 33 percent of demand would be enough to make the United States less beholden to Middle East supplies and would shield the country’s economy from the kind of oil shock that happened during the OPEC embargo in the 1970s.

Total supplies of liquid fuels come from crude oil, natural gas liquids, biofuels such as ethanol, and even a gain in the refining process that produces more petroleum products than the volume of oil going in. One of the easiest ways to keep track is U.S. crude oil production, which has already reversed a decline. August production averaged 6.1 million barrels a day compared with 4.9 million barrels four years ago. That happened despite a decline in Gulf of Mexico production, which was more than offset by places such as North Dakota, which is recovering oil from shale.

Biofuels, mainly ethanol, have become a major player in reducing imports, displacing about 6 percent of annual demand for petroleum gasoline. A federal mandate calls for more than doubling biofuels by 2022, but there are challenges. One big hurdle is bringing along the process of making cellulosic ethanol, which uses ingredients such as corn stalks and switchgrass instead of corn.

Overall U.S. consumption of petroleum has declined by more than 2 million barrels per day. A good chunk of that decline — perhaps half — came from the weak economy. But efforts are under way that could keep consumption down, including the fuel economy standards for vehicles. The Obama administration says the fuel savings from model years through 2025 will amount to 2.2 million barrels of oil a day.

Finally, there is Canada, which accounts for 29 percent of U.S. oil imports. The country reduced oil exports to the United States during the 1970s embargo because it needed the oil for itself, but it is still considered our most reliable supplier. Decisions such as whether to approve the Keystone pipeline could decide whether it will supply more in the future, further reducing imports from other countries.